European shares ended the day mixed in relatively quiet trading, with U.S. markets closed for the Labor Day holiday, which meant no directional cues from Wall Street and typically thinner trading volumes.

Higher oil prices provided support for energy shares, but there is another side to that story. Rising energy costs feed through to consumer prices—energy is a significant component of inflation baskets—and can keep inflation elevated and increase the pressure on central banks to raise interest rates. That concern helped push European yields higher and limited enthusiasm in the broader equity markets.

The major indices closed as follows:

• Germany's DAX: -0.15% at 26,006.53
• France's CAC 40: +0.33% at 8,306.15
• U.K.'s FTSE 100: -0.08% at 10,822.13
• Spain's Ibex: -0.14% at 20,021.80
• Italy's FTSE MIB: +0.25% at 52,230

The pan-European Stoxx 600 finished near unchanged at 649.90.

Energy shares were among the better performers as Brent crude moved closer to $100 per barrel—a level last seen in 2022 following Russia's invasion of Ukraine. European technology shares also received a boost from the strong rally in Asian semiconductor stocks. On the downside, healthcare shares were pressured by a 3.2% decline in Novartis after disappointing drug-trial results.

Germany's DAX lagged modestly amid political uncertainty following the AfD's election victory in Saxony-Anhalt, a state-level result that drew national attention given the party's first win in a state election. France's CAC 40 moved higher after recently coming under pressure from concerns about the country's fiscal outlook, which had also widened the gap between French and German bond yields in recent weeks.

In the European debt market, benchmark 10-year yields moved higher:

• Germany: 3.39%, +4.9 basis points
• France: 4.25%, +4.0 basis points
• U.K.: 5.18%, +4.0 basis points
• Spain: 3.83%, +5.5 basis points
• Italy: 4.22%, +7.0 basis points

Bond prices and yields move in opposite directions, so the move higher in yields represents selling in the European debt market. The catalyst is renewed concern that rising energy prices will keep inflation elevated and force central banks to maintain tighter monetary policy. The ECB is widely expected to raise rates by 25 basis points on Thursday—the latest step in its ongoing tightening cycle aimed at bringing inflation back toward its 2% target. Deutsche Bank is also forecasting another 25-basis-point increase in December.

For stock traders, the rise in oil creates a push and pull. Higher crude prices are supportive for energy companies, but they also raise costs throughout the economy and can keep interest rates higher. Higher yields can then weigh on equity valuations—especially for growth companies whose expected earnings are further into the future. With the ECB decision due Thursday, the pace of future rate increases and the trajectory of oil prices are the key variables markets will be watching.